Correlation Between AIR PRODCHEMICALS and INDOFOOD AGRI
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and INDOFOOD AGRI at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining AIR PRODCHEMICALS and INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and INDOFOOD AGRI RES, you can compare the effects of market volatilities on AIR PRODCHEMICALS and INDOFOOD AGRI and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in AIR PRODCHEMICALS with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and INDOFOOD AGRI.
Diversification Opportunities for AIR PRODCHEMICALS and INDOFOOD AGRI
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIR and INDOFOOD is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES and AIR PRODCHEMICALS is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on AIR PRODCHEMICALS are associated (or correlated) with INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and INDOFOOD AGRI go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and INDOFOOD AGRI
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.66 times more return on investment than INDOFOOD AGRI. However, AIR PRODCHEMICALS is 1.51 times less risky than INDOFOOD AGRI. It trades about 0.26 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.11 per unit of risk. If you would invest 24,756 in AIR PRODCHEMICALS on August 28, 2024 and sell it today you would earn a total of 6,854 from holding AIR PRODCHEMICALS or generate 27.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. INDOFOOD AGRI RES
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| INDOFOOD AGRI RES |
AIR PRODCHEMICALS and INDOFOOD AGRI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and INDOFOOD AGRI
The main advantage of trading using opposite AIR PRODCHEMICALS and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, INDOFOOD AGRI can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in INDOFOOD AGRI will offset losses from the drop in INDOFOOD AGRI's long position.| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Microsoft | AIR PRODCHEMICALS vs. Microsoft |
| INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Microsoft | INDOFOOD AGRI vs. Microsoft |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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